Real gross domestic product (GDP) edged up 0.2% in the fourth quarter of 2023, following a 0.1% decline in the third quarter. In the fourth quarter, higher exports and reduced imports fuelled GDP growth, but this was moderated by a decline in business investment, reported Statistics Canada on Thursday.
Karolina Grabowska
“Final domestic demand, composed of expenditures on final consumption and gross fixed capital formation, edged down 0.2% in the fourth quarter, after a 0.2% increase in the previous quarter. On an annual basis, real GDP and final domestic demand rose for the third consecutive year since the COVID-19 pandemic-induced contraction in 2020. However, outside of 2020, real GDP in 2023 rose at its slowest pace since 2016,” said the federal agency.
The report said exports of goods and services rose 1.4% in the fourth quarter, following a 0.3% drop in the third quarter. The increase was driven by crude oil and crude bitumen exports (+6.2%), which coincided with sustained production of crude oil in Alberta, as well as that of travel services and other transportation equipment and parts.
“The quarter ended on a weaker note than expected, with December GDP showing only a flat reading (consensus +0.2%). However, that was largely due to a decline in public administration thanks to strike activity in Quebec, and a rebound there appears to be supporting growth in January. The advance estimate for the first month of 2024 pointed to a healthy 0.4% increase in GDP.
“While the GDP print for Q4 was above the flat reading expected by the Bank of Canada, and Q1 is also tracking stronger than their prior expectations, growth appears to have been driven largely by an easing of previous supply constraints helping exports and car sales, rather than necessarily an improvement in domestic demand. Because of that, and given that inflation is actually running below the Bank’s January MPR projections, today’s data doesn’t change our forecast for a first interest rate cut in June.”
James Orlando, Senior Economist, TD Economics, said the Canadian economy showed some life in the final quarter of 2024
“Consumers, who have been paring back spending for much of the year, were busy driving around in their new cars and filling shopping malls during the holiday season. We also saw strong demand for exports, as the benefits of a surging U.S. economy spilled over into Canada. At the same time, business investment and government spending were a drag on growth, with the latter reflecting some mean reversion following the big spending outlays to fight wildfires over the summer,” he said.
“A return to growth in the fourth quarter was widely expected, following two quarters of effectively no growth in the country. While today’s report came in better than consensus (+0.8% q/q) and much better than what the BoC was thinking (0% q/q), the narrative on the Canadian economy remains the same: High interest rates are weighing on economic growth. Stripping out international drivers, the economy contracted, while GDP per capita has now declined in five of the last six quarters. The BoC has recognized this weakness in recent commentaries, but it is patiently waiting for inflation to follow suit. We think the wheels are in motion for this to come through the data in the coming months and have penciled in the first BoC rate cut for June.”
Douglas Porter, Chief Economist with BMO Economics, said Canada’s economy is just grinding forward, aided and abetted by solid U.S. spending trends, which are supporting exports.
“There’s no debate that growth is nevertheless anemic, especially when cast in per capita terms (down more than 2% y/y). Business investment is notably weak. Even so, this changes little for the Bank of Canada, as conditions don’t appear to be worsening so there’s no urgency to cut rates. With growth still well below potential, disinflationary pressure will continue, but it will require ongoing patience,” said Porter.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
About Us
Canada’s Podcast is the number one podcast in Canada for entrepreneurs and business owners. Established in 2016, the podcast network has interviewed over 600 Canadian entrepreneurs from coast-to-coast.
With hosts in each province, entrepreneurs have a local and national format to tell their stories, talk about their journey and provide inspiration for anyone starting their entrepreneurial journey and well- established founders.
The commitment to a grass roots approach has built a loyal audience on all our social channels and YouTube – 500,000+ lifetime YouTube views, 200,000 + audio downloads, 35,000 + average monthly social impressions, 10,000 + engaged social followers and 35,000 newsletter subscribers. Canada’s Podcast is proud to provide a local, national and international presence for Canadian entrepreneurs to build their brand and tell their story.
